Wednesday, 9 September 2015
Heading off to college opens up a whole new world of possibilities and responsibilities.
While you're excited about classes, parties, and living on your own, it's important to take time to plan for your financial independence. Just like you wouldn't take a final exam without going to class or studying, you don't want to start school without a firm grasp of your finances.
Think of your budget process as a four-quarter sporting event: assess your opponents and your teammates (i.e., expenses and income) in the first quarter, adjust as needed in the second quarter, dig in during the third and focus on the end game for the fourth quarter. Just like playing a sport, good budgeting takes planning, practice, and perseverance. Follow these tips, and you'll have a great start to a sound financial future.
Before you set foot on campus, take time to create a budget. This is your playbook. Sit down with a spreadsheet and tally up your estimated expenses; be as detailed as possible. Your regular monthly expenses may include:
Some bills, like rent and cell-phone charges, are more likely to be fixed. Things like food entertainment, and laundry may vary each month. Err on the side of caution and use your highest cost estimates to begin.
Take into account there will be once-per-semester costs, like books and lab fees, and add those in to the expenses for your first month. Next, total up all forms of income you have or expect to have over the school year. Include:
Now, add that up and divide the total by the months you will spend at school. The resulting number is your monthly income. Put your expenses and your income together, and you have your budget.
Do your expenses exceed your income? You'll need to take a close look at what you can eliminate or cut back on. Look for "wants" (i.e., entertainment, the latest shoes, fancy coffees) versus "needs" (i.e. tuition, housing, food, books). You may have to give up some of the “wants" until you are able to cover all of the “needs" in your budget.
In the first few weeks at school, you will learn what you're up against in terms of expenses — does food cost more than you thought? Or transportation? Phone bills? Is your on-campus job paying what you thought it would? Does your rent turn out not to cover utilities?
Keep receipts for all of your purchases and track your spending habits. Don't forget to include the birthday card for a friend, the breakfast burrito, or the candy bar. It may seem silly but small expenses can really add up. At the end of the month, total it all up and compare it to your first quarter budget. Do you need to make any adjustments?
Now that you're getting the hang of budgeting, it's a good time to think about what's coming up. Are you planning to take a trip over spring break? Does that advanced course need more expensive textbooks than the intro class? Budget, plan and save accordingly.
You've gotten your budget under control, so now you can look to the future. Do you want to save up to buy a car or other big-ticket item?
Evaluate your budget needs and adjust your spending accordingly so you are able to put a fixed amount each month into savings. Keep in mind, a budget is meant to be a guideline for making good financial choices, and it can be altered at any time to address changes in your situation.
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